China National Human Development Report 2016: Social Innovation for Inclusive Human Development (Executive Summary)*
March 06,2017   By:CSHRS
China National Human Development Report 2016: Social Innovation for Inclusive Human Development
(Executive Summary)*
The “China National Human Development Report 2016,” was jointly authored by the United Nations Development Programme(UNDP)and the Development Research Center of the State Council (DRC). Using the concept of human development,this report comprehensively reviews and systematically analyzes the promotion of inclusive human development via social innovations in China.It also enriches international theoretical research surrounding inclusive development and provides a new analysis of human development in China,helping the world to better understand China.
1. Social Innovation:An Important Approach to Achieving Inclusive Human Development
Based on the “Human Development Index”,this report conducts systematic analyses and evaluations toward China's social and economic development. The index is a comprehensive indicator that has measured levels of economic and social development since its adoption by UNDP in 1990.It consists of the income index,health index and education index and considers these factors in line with three dimensions:economic growth,social progress and political participation. The “inclusiveness” of human development in this report refers to the equal participation of various populations across different regions in economic,social and political development processes;their equal opportunities for development;and the equal distribution of development achievements. “Inclusive human development” stresses that it is not only necessary to enhance the average level of human development,but also to pursue more equal human development,thus narrowing the human development gap between different regions and groups.
This report concludes that social innovation is an important means for realizing inclusive human development. From the perspective of social innovation, this report focuses on government-led policy and institutional innovations and takes into account various social innovations regarding specific methods and technologies used by non-government actors. The content and form of social innovation can be achieved independently,or by emulating the experiences of other countries.
2. China's Experience:Human Development in China Has Made Considerable Progress,Especially to Economic Development. However,Issues Remain,Including Lagging Social Policies and a Lack of Conclusiveness.
Since the reform and opening-up in the late 1970s,China has made great strides towards achieving relatively high levels of human development (see Figure 1). In 2014,China's Human Development Index reached 0.727,ranking 90th among188 countries (and regions). Quce among the 47 countries classed as having a low level of human development,China is now the only country from that group that has achieved a high level of human development.1
Figure 1  Changes to China’s Human Development Index and the World Average2

According to this report,China's rapid economic growth has played a critical role towards its human development progress (see Figure 2). Between 1980 and 2010,China's income index ranked first in the world,and the contribution of economic growth to the growth of its Human Development Index was 55.26 percent.This reached a peak of 6.53 percent between 1980-1990. Around 660 million impoverished rural people benefited from this rapid economic growth and were lifted out of poverty.3 Material standards of living for once-deprived groups have improved significantly,and opportunities and choices have greatly expanded.
Figure 2  Changes to China’s Human Development Index and its component Indices4

This report concludes that the development of social policies in China has been slow,especially before China's reform and opening-up when social policy played a minor role in promoting human development in China.However,its contribution has increased gradually in recent years. When controlling for income,the results of China's Human Development Index show that between 1980 and 2010,China's Human Development Index remained largely the same,i.e. China's health and education indices did not catch up with other countries.5 However,since the start of the 21st century,social policies have played a much more active role in promoting human development in China. The contribution of China's education index to its Human Development Index rose from 24.47 percent between 1980 and 1990 to 44.16 percent,and between 2000 and 2010 it was almost equal to China's income index. China's health index has also improved noticeably since 2000.
Figure 3 Contribution of China’s Education Index, Health Index and Income Index to the Growth of its Human Development Index (1980-2010)6

This report also reveals that human development in China is being held back by its lack of inclusiveness. Economically, however, household income levels in China have improved significantly. Its income gap,however,has widened,especially since the 1980s when it expanded rapidly.In 2007,the average income of the richest 10 percent of China's population was 38 times larger than the poorest 10 percent of its population.7 The income gap between urban and rural areas and different regions was also large. Although the income gap has narrowed in recent years. Degrees of economic inequality in China have remained very high compared with other countries. In terms of the health and education, inequality among different groups of Chinese people has decreased,however regional and urban-rural inequality is still fairly significant. Issues concerning public participation also persist.8
Figure 4  Gini Coefficent: China’s Household Income Gap (1981-2015)9 

3.China's Experience Shows That Social Innovation Can Play an Essential Role in Promoting Human and Inclusive Development.
According to this report,since the reform and opening up,China has stimulated inclusive human development by encouraging the equal development of multiple industrial sectors and the adoption of flexible labour market policies. On the one hand,China rigorously controls household registration and facilitates labour migration, which helps to stimulate sustained and rapid economic growth.This has created considerable employment opportunities and lifted many families out of poverty. On the other hand,China provides employment support and social protection to several vulnerable groups (such as those made redundant following the reform of state-owned enterprises, SOEs), rural migrant workers in cities and college students, thus promoting inclusive growth.
In the educational sector,China has made achievements by adopting targeted education policies based on various issues and demands during various periods. During the early years of the People's Republic of China(PRC),when educational levels were low,basic education was popularized through broad mobilization policies. After the reform and opening up,educational levels were still relatively law, and human resources were in short supply across industries. Against this background,education was given a more prominent status and is now a higher priority for China's government, which aims to use it to promote national economic and social development.China has aimed to “rejuvenate the country through science and education”and has implemented a series of laws and regulations and released important policy documents related to the development of its education sector,with plans to increase education investments and make all-round improvements to levels of education in the near future.
Table 1 Educational attainment of China's population aged 15+-China and world average (unit:year)10

Regarding healthcare,this report finds that China has a rich experience with regard to public healthcare,which has significantly improved the health of its citizens.Since the foundation of the PRC,China has made efforts to strengthen its public health system by preventing and controlling infectious and endemic diseases,and by improving the quality and capacity of rural healthcare services.China's efforts have been used as examples by several other low-income countries.After the reform and opening up,there were a number of set-backs to China's health sector. However,in recent years,developments to China's healthcare sector have been taken more seriously. The government has comprehensively strengthened the public healthcare system, especially for woman and child, and built up the medicare system covering all the citizens. As a result, the health condition of Chinese citizens has been improved significantly.
Figure 5  The death Rate of Pregnant Woman in Cities and Rural Areas (1/100000)11

According to the report, political freedom and social participation are essential to human development. China’s systems and policies vary from time to time. This also influences human development and inclusiveness differently. Before the open-up, China had a highly centralized power and the society was highly organized. This kind of social structure played a key role in erasing bad social customs, and restoring and rebuilding social order. However, individual rights and freedom were also highly restricted. After the open-up, the social structure has deeply transformed, from centralized power to separation of power, from rule of man to rule of law, from a managerial government to a service-oriented government. The paradigm political reforms were conducted including carrying out autonomous practices, such as election within the grass-roots governmental organs , encouraging social participation in public affairs management and enlarging participation opportunities for all.
The reports points out that the achievement of China’s inclusiveness in human development partly resulted from the globalization, but it mainly benefited from the reform and the innovation based on the domestic situation conducted by the Chinese government. The innovative experiences include concentrating on the sharp challenges emerging in human development, enhancing the harmonious interaction between economic growth and social development, maintaining the flexibility during the decision making process, establishing the effective mechanism for supervision; focusing on the coordination of central governance and local innovation and learning from international experiences to adapt to Chinese domestic circumstances.
4. China Has Launched Numerous Experimental Explorations and Innovations Targeting the Complex Problems and Challenges in the Process of Inclusive Development and Has Gained Some Comparatively Mature Experiences. 
Figure 6  Proportion of  the Population Aged 60 and above in China (%)12

This report selects several examples to demonstrate China's progress in a number of social policy areas.In terms of poverty alleviation,a number of policy measures,including targeted poverty reduction,poverty alleviation through characteristic industries and conditional cash transfers(CCT)have been adopted,promoting multi-dimensional poverty reduction in a more targeted manner.In terms of education,the equalization of compulsory education has been vigorously promoted in China by actively adopting enrollment quotas for high-quality senior high schools and junior high schools,balancing the quality of teaching personnel,promoting the mobility of teachers and principals,and other initiatives. The development of preschool education has been perfected and early childhood development in poverty-stricken areas has been promoted.Special enrollment plans in poverty-stricken areas have also been implemented and equal access to higher educatian has been improved.In terms of health improvements,China has strengthened its medical equipment (both hardware and software) in its hospitals,improved the efficiency of its management systems,and the level of standardized services in health institutions has been boosted. The quality of public hospitals has improved,the health system is better organized,the distribution of responsibilities among personnel has improved and diagnostic and treatment practices have been enhanced. Finally,social governance in China,is shifting away from being largely top-down and government-dominated to encouraging the participation of the whole of society. From mainly relying on government-imposed laws and from an emphasis on “management”,China now offers a combination of governance and services,and addresses both the symptoms and root causes of social issues. At the local level,the country has undertaken investigations to examine relationships between the Party committee,government,society,and the participation of social organizations in grassroots governance,which has provided some valuable experience for other countries with similar governance issues.
5. While China Could Learn from International Experience Regarding Inclusive Human Development, its Efforts Must be Based on National Conditions and Must Follow China-specific Rules and Principles.
International experience shows that social innovations can help to reduce inequality and promote inclusive human development. However,this report believes that it is also important for China to determine its strategies and policy tools to deal with challenges and complexities in line with its own national characteristics. Nevertheless, China can learn a lot from international experience,including:
● Easing income inequality needs the simultaneous  adoption of various measures,including addressing the structure of the labour market,establishing  a fairer and more sustainable social security system, leveling the income distribution -- here,tax and social security systems (and other redistributive measures) can play important roles.
● Poverty reduction should be shifted from an emphasis on economic poverty to all-round poverty alleviation with multiple dimensions -- including education,health,housing,public goods,among others.
● Promoting educational equality is an important way for various countries to encourage inclusive and sustainable human development that is also conductive to economic growth and social integration.
● It is necessary to establish a stable health system where services are integrated,to attach great importance to the capacity of local health services,and to improve the health investments.
● Expanding public participation,mobilizing the third sector and enhancing the supervisory role of the media are important ways to improve social governance-as exemplified by international experience.
International experience shows that countries perform according to their own special economic and social contexts. When international experience is referenced,the following should be borne in mind according to this report:
● Governments should establish a strong policy system that accounts for income,education,healthcare and participation and ensures that the inclusiveness of human development can be improved.
● In order to achieve human development and inclusive growth,it is necessary not only to form a clear concept of development but to develop appropriate policy measures,implementation methods and set concrete goals.
● It is necessary to handle relationships between  government,market,society,individuals and families responsibility,and to constantly improve organizational and administrative structures,strengthen policy evaluation mechanisms,and implement a  trial-and-error and error-correction system.
● In terms of specific policy design for inclusive human development,it is necessary to take challenges into full consideration. These include national conditions,China's overall low level of economic development,development imbalances between regions and populations,China's rapid industrialization and urbanization,population ageing,and the transformation of China's social structure.
In order to learn from international experience and to ensure that its development is in line with its complex and unique national situation,this report concludes that China must continue to experiment and innovate so that it finds its own solutions to human development problems.
6. To Improve its Human Development and Inclusiveness, China Should Design Clearer Social Policy Goals and Implement Innovative Reforms more Actively.
According to this report,China must reform and innovate its social policies in order to improve its levels of human development and inclusiveness in the coming decade (and beyond). This was also an important component of the concept of “co-construction and sharing”,recommended at the 5th Plenary Session of the 18th Central Committee of the Communist Party of China (CPC).
● Economic growth,equality of opportunity and social coordination will be the three major drivers for China to achieve inclusive human development. It will be necessary for China to achieve these in an integrated and coordinated way.
● The focus of social policies should shift from over all expansion to more be spoke and targeted expansion,and attention should be paid to how the system is constructed and integrated. It will also be necessary to focus on social investment policies such as employment,education and healthcare, and to moderately restrain social consumption policies,including minimum living allowances and public pensions,and to organically combine state-provided social protection with private provision.
● Currently,inequality of opportunity is a prominent issue for social policies in China.In coming decades, it will be necessary to reform the direction and levels of public investment,put effort into improving the inclusiveness and targeting of social policies, enhance investment and efficiency,and to ensure that low-income,as well as middle-income groups benefit from these changes.
● In the context of varied governance models,it will be necessary to innovate social governance mechanisms, build cooperative and inclusive relationships between the national government and society,and to achieve win-win results between public and individual interests,as well as between long-term interests and short-term interests.
Based on the general principles identified,this report considers it necessary to promote several key policies,including:
Education should be strategically prioritized as a social policy for inclusive development. Once education has been provided to all citizens equally at every level of education,there are two basic directions for educational innovation. One is to promote the fairness of education -- the key here is to commit to and resolutely push forward reforms that promote educational fairness. The other is to improve the quality of education,and to cultivate a sense of social responsibility among students in the face of social,economic and environmental problems.
Policy innovations in the fields of medicine and healthcare should focus on solving issues of low efficiency and fairness.Here it is crucial to establish a salary system that can correctly motivate medical and health care professionals,and to take practical measures to strengthen local hospitals and services and to effectively grade medical provision. It is also vital to promote integration and cohesion within the medical system,and to create a system where all users enjoy equal access to basic medical and health services.
According to the central government's plan,regarding poverty alleviation and social assistance,it will be necessary to implement targeted poverty alleviation and elimination mechanisms,which will improve the sustainability of poverty elimination via local and context-specific measures. At the same time,poverty alleviation policies should consider China's cultural traditions and the uniqueness of its rural societies (which are founded on self-reliance and self-improvement),and strengthen the capacity of China's poverty-stricken populations. It will be important to avoid “blood trans fusion” like poverty alleviation and welfare dependency;Instead,goals must be achieved via “blood-generation” poverty alleviation methods.
China's old-age pension system must be designed to prevent welfare dependency primarily upon the State. A basic system should be introduced that encourages integration,improves fairness and guarantees sustainability, mainly aimed at poverty reduction and redistribution.This mechanism must balance rights and obligations.Specific policy choices include reducing the substitution rate of the basic state pension,and increasing the retirement age.
7. Expectations and Prospects:Building a Social Policy System Funded by Social Investment and a Compound Social Governance System Will be Conducive to the Continuous Improvement of China's Human Development and its Inclusiveness.
This report believes that in the coming decades,China should be committed to finding solutions to regional inequality and inequality between populations,and also to addressing rapid population ageing,economic slowdowns,structural transformations and other major challenges. At the same time,China has a lot of advantages that will help it to promote and achieve inclusive human development,such as a relatively centralized political system -- this means that it can avoid challenges posed by vested interests. China's national economy will continue to grow at a medium-to-high speed,and China's new found wealth can be used to support incremental reforms,avoiding the need for stock market modifications.The lessons China has learned from other countries can also be used to guide its future development.
Based on China's economic growth,this report expects that China will continue to increase its social expenditure in future.It is also anticipated that China will adjust and optimize its social expenditure structure,support the inclusive development of its education and healthcare systems,and promote the public's ability to innovate,develop and self-manage. In coming years,it is anticipated that China will build a social-investment-based social policy system and an integrated social governance system.Innovations and improvement these two social realms will contribute to the sustainable development of China's economy,and will promote the continuous improvement of its inclusive human development.
* This report is a collaboration between UNDP China and the Development Research Center of the State Council of China.
1. Zhang Xiulan et al,“Quantitative Review and Prediction of China's Human Development lndex,” See Appendix.
2. Source:UNDP,”Global Human Development Report 2014;Global Human Development Report 2015”. Available at http//hdr.undp.org/en/content/human-development-report-2014.
3. Available at http://www.sico.gov.cn/xwfbh/xwbfbh/wqfbh/2014/20140127/zy30356/Document/1362 130/1362130.htm.
4. Source:UND Pwebsite. Available at http: //hdr,undp.org/en/content/human-development-index-hdi-table.
5. Calculations using data from the UNDP website. Available at http //hdr.undp.org/en/content/human-development-index-hdi-table. See the background report made for this NHDR:Zhang Xiulan,Soclal Policy Innovation and Human Development:China Experience(2015).
6. Source: Calculated according to data on UNDP Website. Available at http//hdr.undp.org/en/content/human-development-index-hdi-table.
7. The World Bank & Development Research Center of the State Council of P. R. C.: China 2030:Building a Modern,Harmonious and Creative Society, China Financial & Economic Publishing House. p. 304.
8. B. Enserink and J. Koppenjan(2007), Public Paticipation in China:Sustainable Urbanization and Governance,Management of Environmental Quality:An international Journal,Vol. 18 Issue 4,pp. 459-474.
9. Source: Data for 1981 to 2002 was calculated by Mortin Ravallon and Shaohua Chen from the World Bank in 2004. Based on a household survey conducted by the National Bureau of Statistics of China. Data for 2002 was derived from the ALG a Gini coefficient database for 166 countries covering nearly 60 years built by Btanko Milanovic formet chief economist of the World Bank.Data from 2003 to 2014 was based on the Gini coefficient published by the National Bureau of Statistics of China over the 11 years.
10. Source: Robert J. Barro & Jong-Wha Lee, “A New Data Set of Educational Attainment in the World,1950-2010”. Available at http//ldeas.repec.org/p/nbr/nberwo/15902.html.
11. Source: 2015 China Statistical Yearbook. Note: In 2014, death rate of pregnant woman in cities and rural areas are 20.5/100000 and 22.2/ 100000 respectively.
12. Source:China Development Research Foundation. Available at http://www.cdrf.org.cn/plus/view.php?aid=639.